GeoEye bids $792 million to acquire DigitalGlobe

MiaLamar

GeoEye Inc.
GEOY
went public with its aims to acquire fellow satellite imagery company DigitalGlobe Inc.
DGI, +4.39%
revealing it has made a "friendly" offer to the company to acquire it in a $792.3 million cash-and-stock deal.

GeoEye is offering DigitalGlobe shareholders a total consideration of $17 a share in cash and stock, a 26% premium to its Thursday closing price yet well below its August 52-week high at $27.42. Shares shot up 18% to $16.01 in premarket trade.

Like other companies catering to the federal government, DigitalGlobe has grappled with federal spending cutbacks that have raised concerns about its sales prospects. It soothed some of those fears earlier this month when it reported a key contract with the U.S. government had been fully funded for fiscal 2012.

GeoEye Chief Executive Matt O'Connell on Friday pointed to these challenges as support for his proposal.

"In the face of significant pressure on the U.S. defense budget and intensifying international competition, a combined company will be better positioned to provide the U.S. government with the time-sensitive geospatial intelligence that is needed to support its mission in a very cost-effective manner during these fiscally conservative times," O'Connell said.

In a letter to DigitalGlobe Chief Executive Jeffrey R. Tarr dated Friday, O'Connell also noted recent discussions between the two companies concerning a potential tie-up and said the company is "prepared to move quickly" to execute an agreement.

He also said the GeoEye board would consider restructuring its proposal to increase the cash consideration to up to 100% of the purchase price or reduce the cash consideration and increase the stock portion of its offer.

A spokesperson for DigitalGlobe wasn't immediately available for comment Friday.

Shares of GeoEye were inactive in Friday premarket trade after closing at $24.03.

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